The Ultimate Guide to Real Estate Investment in Canada

Purchasing property insurance is not only about reducing the risk of bank loans but also about effectively controlling losses caused by accidents for residents.

Metro Vancouver and the Greater Toronto Area are the most populous cities in Canada, especially Vancouver, where affluent Chinese immigrants make up a significant proportion of the city’s population.

Attracted by favorable natural environments and educational resources, in recent years, there has been an increasing number of mainland buyers purchasing houses in Canada. Some of the inherent doubts of mainland immigrants about real estate transactions have gradually emerged. Today, let’s talk about everything related to real estate investment in Canada.

Initial Issues

  1. Can buying a house in Canada lead to immigration?

No, it cannot. Although buying a house in Canada is considered a form of commercial investment, it is a personal investment for individuals, and the Canadian government does not have the authority to regulate or manage it.

Since applying for Canadian investment immigration requires funds to be placed under the jurisdiction of funds designated by the Canadian government, the investor does not have the right to control the investment funds. Therefore, buying a house in Canada does not comply with the regulations of the Canadian government’s investment immigration. So far, the Canadian government has not opened such a policy.

  1. Do buyers and sellers have to be present in Canada for real estate transactions?

If the buyer needs to apply for a loan from a Canadian bank, they must be present in Canada to sign the loan documents with the bank. If a bank loan is not needed, the purchase contract or the deposit, inspection, and delivery procedures can be signed through fax or other legally recognized forms.

Your hired real estate agent will handle the documents that require your signature through fax, scanning, email, etc. The house inspection report will be prepared by a third-party registered inspector. The final transaction and obtaining property documents from the real estate bureau will be completed by the respective lawyers of the buyer and seller.

  1. Are there any restrictions for Chinese people buying houses in Canada? Can they buy any house or property they like?

Foreigners or non-Canadian residents are currently free to buy and sell Canadian real estate. The Greater Toronto Area and Metro Vancouver require a 15% and 20% foreign buyer tax, respectively.

According to the Canadian federal government’s Citizenship Act, non-Canadian residents can purchase, own, and sell real estate, and they must abide by the same regulations and conditions as Canadian residents or citizens. However, this law also gives provinces the power to restrict the purchase of land by non-citizens and non-permanent residents or corporations and associations controlled by them.

  1. Are there any requirements for foreigners buying houses in Canada?

Foreigners need to open a bank account in Canada. Regardless of whether they are Canadian residents, they need to maintain a good credit record. Foreigners need to have sufficient down payments and can authorize relatives or friends in Canada to complete mortgage loans on their behalf. They also need to manage and arrange Canadian bank accounts.

When foreigners purchase houses with loans, the bank will require the lawyer to note the “foreigner tax clause” when registering the property rights. That is, if the borrower is still a non-resident when selling the house, they need to set aside some of the selling price until the tax declaration is completed before deciding how to dispose of the sales proceeds.

  1. What are the most valuable cities for real estate investment in Canada?

To assess the specific real estate investment value of specific cities in Canada, several key factors need to be considered simultaneously, such as city size, population growth, total economy, and industrial structure.

Considering these key factors and related factors such as climate, the Canadian cities with greater real estate investment value mainly include Metro Vancouver (British Columbia), Toronto and its surrounding cities (Ontario), Calgary (Alberta), Saskatoon (Saskatchewan), and Regina (Saskatchewan).

  1. Which city with a large Chinese community is suitable for buying a house?

Metro Vancouver (British Columbia), the third-largest city in Canada, has a stable economic foundation, is surrounded by mountains and the sea, has a beautiful environment, mild winters, and cool summers. It attracts a large number of new immigrants every year, with a relatively high proportion of Chinese residents who have significant influence. The flight time from China is relatively short. It was ranked third in the global livable city rankings in 2012 and had been ranked first for ten consecutive years.

  1. What are the general types of residential properties in Canada?

Detached houses (also known as single houses): These are single independent houses built on their own land. Owners have the right to the house and the land without any management fees.

Semi-detached houses: One side of the house is connected to the outer wall of another house, without any management fees.

Townhouses: A row of houses connected on both sides, divided into two types: those with management fees and those without, depending on whether the property has shared and common parts owned by other owners.

Condominiums: Each unit has independent owners who jointly own their shared and common parts. There are management fees

  1. Can foreigners obtain loans from Canadian banks for house purchases? How much can they borrow? Is it related to the age of the property and the age of the buyer?

Foreigners can indeed secure loans. Canadian residents can typically borrow up to 70% of the house price, while non-Canadian residents can borrow around 60%-65%. Loans can be repaid over 20-25-30 years, and the current interest rates are significantly lower compared to those in China. Loans are not related to the age of the property and are generally not dependent on the buyer’s age, reflecting the confidence of Canadian banks in the real estate market.

  1. Are there any special requirements for foreigners applying for mortgage loans compared to local residents? What is the application process like?

There isn’t much substantial difference from locals, and the procedures are quite similar. One distinction is that foreigners don’t enjoy the “residence” exemption from capital gains tax that local residents do. When foreign-owned properties are sold, a portion of the profits must be paid as capital gains tax.

When foreigners apply for mortgage loans, banks and financial institutions examine the applicant’s basic information, income, credit history, down payment, and the condition of the property. However, due to the special circumstances of foreign nationals, it is essential to note the following two points:

  • Foreigners applying for a Canadian mortgage need to open a full-service account in a Canadian bank for monthly payments.
  • Foreign residents can apply for loans in Canada without a credit history.
  1. What documents are required for a house purchase loan?

The documents required for a house purchase loan can be roughly divided into three categories: property documents, personal materials such as work-related documents, and down payment materials.

Property documents mainly include the house purchase contract, which can be quite substantial, especially if it’s a new house purchased from a developer. The work-related documents are the most closely examined by the bank. If you are a full-time employee, you generally need to provide a job letter, company letterhead with the company’s name, address, phone number, and fax, stating your full name, employment status, start date at the company, position, and salary. Pay stubs and tax documents might also be required by some banks. In addition to work-related materials, some personal information and photos are also necessary.

  1. What should you do if you’ve signed a house purchase contract but cannot secure a bank loan?

Most people need to apply for a bank loan when buying a house, and many initiate loan discussions with the bank only after signing the purchase contract, so it’s possible to encounter a situation where you can’t secure the loan after signing. How can you cancel the contract without breaching it in such a scenario?

Buyers must include a conditional clause in the house purchase contract, allowing them to apply for a loan within a few days. If the required loan amount or interest rate standard is not obtained, the buyer has the right to cancel the contract, and all deposits will be refunded to the buyer without any liability for either party.

This clause is not included in the standard contract, so buyers need to add it based on their credit ability to leave themselves an exit without breaching the contract due to the inability to obtain a loan. Similarly, if either party requests a specific condition to be met before the house’s transfer, such as a house inspection or selling the current residence before buying a new one, both parties must clearly write their requirements in the contract as conditions, just in case the condition is not met, and the contract can be canceled.

  1. Do you need to pay a deposit when buying a house in Canada?

The down payment for buying a house is generally 5% of the house price, and this amount must be paid within 24 hours of finalizing the contract. It will become part of the down payment on the closing date.

  1. Can the first-time homebuyer tax be exempted in Canada?

Taking British Columbia as an example, the conditions that buyers need to meet are as follows:

  • Canadian citizen or permanent resident
  • Have lived in British Columbia continuously for 12 months before the property registration, or filed taxes twice in the past 6 years
  • Never owned any property globally
  • Never enjoyed the first-time homebuyer’s new house discount program

Conditions for the purchased property:

  • No restrictions on the age of the property, and it must be located in BC
  • The property will become your primary residence
  • The fair market value of the property is not more than $500,000
  • The land is not larger than 0.5 hectares (about 1.24 acres)

Additional conditions for buying a second-hand house:

  • Must move into the purchased house within 92 days after the property is registered
  • Must continue to use the house as the primary residence within one year after moving in

For building a new house: If buying land and building a new house is your first house purchase, the following conditions must be met to apply for the transaction tax exemption:

  • The total sum of the land price and the house construction cost must not exceed $500,000 if registered before February 21, 2017, and must not exceed $525,000 if registered after February 22, 2017.
  • The house must be built and moved into within one year after the land registration date.
  • Must continue to use the house as the primary residence within one year after moving in.

If you meet all the above conditions, the lawyer or notary can waive the property transfer tax during the property transaction and help submit the application, which the government will review within the next year. If the conditions are not met, the applicant will need to pay the tax and a fine equivalent to twice the tax amount.

  1. Is house insurance mandatory?

For Canadians, the first thing to do after buying a house is to purchase residential insurance. Although it is not legally mandatory to purchase residential property insurance, many people are required to do so by banks that provide mortgage services. Therefore, mainland immigrants should understand that buying house insurance is not only about reducing the risk of bank loans but also about effectively controlling losses caused by accidents. Similar to car insurance, house insurance is indispensable in our lives. Even if you are a rich person who has paid off all your loans, continuing to buy insurance is not a bad thing.